Georgia Bank Loses from Bank Foreclosed Home Inventories

by Peter Vernon on States

Another Georgia bank is facing financial trouble because of its bad real estate investments and its bank foreclosed home inventories.

United Community Bank, the third biggest bank in Georgia, has posted a loss of $16 million in the second quarter of 2009, marking its fourth consecutive quarterly loss. The loss is equivalent to a per-share loss of 38 cents.

The bank has written off large amounts of problem loans from its books, writing off a total of $231 million in the past 4 quarters, including $58.3 million in the second quarter.

Jimmy Tallent, CEO and president of the bank, said the bank’s investments in the housing sector, particularly in Atlanta, have largely caused the losses.

Bank officials said they invested millions in housing projects in metropolitan Atlanta, which is now struggling with overbuilding and record numbers of bank foreclosed home inventories.

They also said they are monitoring the performance of loans provided to the commercial real estate sector, which has been facing difficulties because of lack of tenants and the sharp declines in revenues. In the second quarter, non-performing loans made to the commercial real estate sector soared to $65 million.

In the second quarter, the total amount of the bank’s non-performing loans reached $287.8 million, a significant increase from the $259 million in the first quarter.

United Community Bank is not the only bank in Georgia facing difficulties because of their exposure to failed securities and to the residential real estate sector, which is now clobbered by bank foreclosed home inventories.

Early this month, the Federal Deposit Insurance Corporation closed Community Bank of West Georgia and Neighborhood Community Bank of Newnan and approved the takeover of Neighborhood Community’s deposits and other assets by Charter Financial Corp.

Then the FDIC closed First Piedmont Bank and chose First American Bank and Trust Company to take over First Piedmont’s deposits.

Last week, FDIC closed six more Georgia banks, which are all subsidiaries of Security Bank Corporation.

With the bank closings last week, the total number of Georgia banks which have failed this year has reached 16, more failed banks than in any other state.

FDIC officials said the banks were weighed down by failed mortgage-related investments, including large bank foreclosed home inventories. They added most of the failed banks were operating in the Atlanta area, where the real estate market collapsed because of record numbers of bank foreclosed home inventories.